Stocks rose on Monday, the first trading day of the month, as markets recovered some of the sharp losses from last week and braced for the U.S. presidential election.
CNBC's Jim Cramer said Monday's gains for the Dow and S&P 500 may be driven in part by easing concerns over a delayed or contested election result.
"If you're really short, you're really betting that everything has to go wrong at this point," Cramer said on CNBC's "Squawk on the Street." "[The market] really got oversold last week and it's entirely possible that we elect someone tomorrow."
Ahead of Tuesday's election, Joe Biden held a substantial national lead over President Donald Trump. The former vice president garnered 52% of support from registered voters versus 42% for the president, according to a NBC News/Wall Street Journal poll from Sunday.
The Senate election could also be crucial for the markets as many key policy shifts including further fiscal stimulus hinge on who holds the majority control.
"The world is still largely in a holding pattern as investors await clarity on the U.S. election," Adam Crisafulli, founder of Vital Knowledge, said in a note. "The world will likely be a lot clearer in just a few days thanks to the election being over, stimulus talks resuming in Washington, [and] further central bank support."
Honeywell and Walgreens Boots Alliance were the best-performing Dow stocks on Monday, gaining more than 5% each. The S&P 500 was led higher by gains in the energy, materials and industrial sectors. Energy and materials each gained at least 3.4% and industrials popped 2.7%. Big Tech, meanwhile, struggled as Facebook and Amazon dipped 0.7% and 1%, respectively.
Investors betting on a potential Biden victory increased positions in solar stocks. The Invesco Solar ETF (TAN) rose 3.2%.
The major averages were coming off their worst week since March 20 as coronavirus cases surged, fiscal stimulus negotiations fell apart and as shares of mega-cap tech companies slumped following their quarterly earnings reports. Those losses led to sharp monthly declines for the major averages. The Dow, S&P 500 and Nasdaq posted their first back-to-back monthly losses since March.
Some on Wall Street believe the sell-off leading up to Election Day gives the market less downside risk to a contested result.
"Even though we're worried that there could still be one more wave down if we get another big influx of uncertainty, we think the stock market is now setting up nicely for a nice net advance over the next two months or so," Matt Maley, chief market strategist at Miller Tabak, said in a note on Sunday.
Mike Wilson, chief U.S. equity strategist at Morgan Stanley, thinks investors should start buying stocks after the recent pullback, "but selectively."
"The worst of the correction is over in our view but we still think the next month is likely to remain volatile and uncertain as we navigate what is shaping up to be a much closer election than expected just a few weeks ago and risk of further lockdowns as the virus runs its course," Wilson said in a note.
The major averages hit their session highs on Monday after Institute for Supply Management said its manufacturing index reached a two-year high in October. The market's comeback came even as England adopted a stay-at-home order to fight the coronavirus.
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